Siam Cement earnings' preview: robust quarter expected

Thai conglomerate SCC is expected to report a strong net profit of THB10.2bn (US$315m) in the first quarter of 2015, up 21 per cent YoY and 15 per cent QoQ, according to estimations by SCB Securities.

“We continue to like SCC for several reasons: 1) it benefits from low oil price via wider spreads and cheaper fuel costs and from a weak baht as a net exporter; 2) 2Q15 profit will continue strong, 3) solid three-year earnings growth of 16 per cent,” the research house stated.

First quarter net profit is expected to be driven by an extra gain of THB1.6bn from the divestment of its remaining 10 per cent in Michelin (Thailand), 2) better chemical units, with wider spreads YoY and lower inventory loss QoQ and 3) seasonally better non-chemical units, with higher sales volume and lower maintenance expenses.

Cement and building materials division
Looking specifically at the cement and building materials unit, QoQ growth is expected from seasonally higher sales volume but the performance is likely to be weaker YoY . Local cement sales volume is believed to have fallen two per cent YoY (vs. +4 per cent in 1Q14 and -3 per cent in 4Q14). A slight drop in the volume of housing product sales (roofing tiles and fiber cement products) will be offset by the rise in exports of ceramic tiles, SCB notes. Margin will stay healthy, thanks to lower costs for fuel (coal, power and natural gas) and transportation (diesel) amid stable product selling prices, it adds.

Profit to hit new highs?
SCB expects SCC's profit to hit new highs through 2017. Chemical spreads will be widened by the good global demand and supply environment and cement sales volume will pick up as local demand returns and upon startups of its new plants in Cambodia, Indonesia, Myanmar and Laos over 2015-2017, adding 6.3Mta (+26 per cent), to capacity. The cment margin will improve as a portion of low-margin export sales (4Mta at present) will be diverted to the local market where margin is higher.

SCC's first-quarter 2015 earnings will be released on 29 April 2015.